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The Impact of State Disclosure Requirements on Municipal Yields

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  • Fairchild, Lisa M.
  • Koch, Timothy W.
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    Abstract

    Municipal bonds are not subject to federal registration requirements imposed upon corporate securities issuers. Instead, each state determines whether municipal issuers must disclose any information and, if disclosure is required, what type of information must be provided. This research examines whether the net interest cost on competitively sold municipals differs across issues in states subject to full disclosure versus states that do not require disclosure. Results indicate that there is no evidence that disclosure requirements screen out risky issues and that net interest cost for nonrated bonds is, on average, approximately 14 basis points less in states with disclosure requirements than in states with no mandatory disclosure. Disclosure is found to have the most significant effect on nonrated bonds.

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    Bibliographic Info

    Article provided by National Tax Association in its journal National Tax Journal.

    Volume (Year): 51 (1998)
    Issue (Month): n. 4 (December)
    Pages: 733-53

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    Handle: RePEc:ntj:journl:v:51:y:1998:i:n._4:p:733-53

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. L Paul Hsueh & P. R. Chandy, 1989. "An Examination Of The Yield Spread Between Insured And Uninsured Debt," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, Southern Finance Association;Southwestern Finance Association, vol. 12(3), pages 235-244, 09.
    2. Thompson, G Rodney & Vaz, Peter, 1990. "Dual Bond Ratings: A Test of the Certification Function of Rating Agencies," The Financial Review, Eastern Finance Association, Eastern Finance Association, vol. 25(3), pages 457-71, August.
    3. Simon, Carol J, 1989. "The Effect of the 1933 Securities Act on Investor Information and the Performance of New Issues," American Economic Review, American Economic Association, American Economic Association, vol. 79(3), pages 295-318, June.
    4. Hsueh, L Paul & Chandy, P R, 1989. "An Examination of the Yield Spread between Insured and Uninsured Debt," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, Southern Finance Association;Southwestern Finance Association, vol. 12(3), pages 235-44, Fall.
    5. Jarrell, Gregg A, 1981. "The Economic Effects of Federal Regulation of the Market for New Security Issues," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 24(3), pages 613-75, December.
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    Cited by:
    1. Jayaraman Vijayakumar & Kenneth Daniels, 2006. "The Role and Impact of Financial Advisors in the Market for Municipal Bonds," Journal of Financial Services Research, Springer, Springer, vol. 30(1), pages 43-68, August.

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